Daily Management Review

Chinese oil companies stop buying Iranian oil


The Wall Street Journal reported, citing its own sources that Chinese oil companies China National Petroleum Corp. (CNPC) and China Petrochemical Corp. refused to supply oil from Iran in November.

The same sources told the American newspaper that Kunlun Bank, which is owned by CNPC, has already notified the Iranian counterparties that it will stop interacting with them on November 4.

 “We were told that from November 1, Kunlun will no longer accept payments from Iran. In fact, this means that Iran will stop importing from China,” said a top manager of a factory that supplies electronic components to Iran.

According to the state statistics service of China, China’s exports to Iran amounted to $ 16.4 billion in 2016. The volume of imports in the same year was $ 14.8 billion, mainly thanks to oil supplies.

By the way, Kunlun was chosen during the previous sanctions standoff between the United States and Iran as the main settlement bank with Iran in order to protect other Chinese financial institutions from the restrictions. In 2012, the United States imposed sanctions against Kunlun, as a result of which, in calculations, the bank had to actually abandon settlements in dollars in favor of the euro and the yuan.

It is expected that after November 4, the United States intends to impose sanctions on all countries that do not refuse to import Iranian oil.

The story of the resumption of US sanctions against Iran began in May 2018. Then, US President Donald Trump announced Washington’s withdrawal from the Joint Comprehensive Action Plan, the so-called nuclear deal. It was concluded between Iran and six countries (USA, Great Britain, Russia, France, China and Germany) and provided for the abolition of numerous sanctions against Iran in exchange for limiting the country's nuclear program.

According to Trump, Iran has not abandoned plans to build nuclear weapons. He says that the country pursuing an aggressive foreign policy and supports terrorist movements.

Coming out of the agreement, the United States automatically resumed the previous sanctions regime in force until 2015. Since May 2018, the US State Department has conducted extensive outreach work among Iranian counterparties, first of all, in China and India. Washington’s main goal is to nullify Tehran’s sale of oil. Iran is the third largest producer of oil among OPEC countries (after Saudi Arabia and Iraq).

The results of US pressure are already visible. Oil production in Iran fell to its lowest level in 2.5 years. According to the International Energy Agency (IEA), in September it amounted to 3.45 million barrels per day. Deliveries of Iranian oil abroad decreased by 800 thousand bpd compared to the figure for the second quarter of 2018 - to 1.63 million bpd. Meanwhile, in 2017, daily production in the Islamic Republic, according to OPEC, reached 3.87 million barrels. And BP in its review estimated it at 4.98 million bpd.

China and India bought about 600 thousand bpd from Iran. In September and in October, US Secretary of State Mike Pompeo visited both countries and personally explained the US position against Iran and what sanctions will be imposed if the cooperation continues. In early September in India, he said that “we keep saying it: on November 4, sanctions are imposed on oil exports from Iran... We expect Iranian oil exports to fall to zero, otherwise sanctions will be imposed on importers ... ".

The US conflict with China is more complicated. Washington states that China is trying to interfere in the internal affairs of the United States, and also conducts purposeful work against President Donald Trump.

Like Moscow, Beijing is accused of having “initiated an unprecedented attempt to influence public opinion”, as well as the mid-term elections in 2018 and the election of the US president in 2020.

In September 2018, the United States already imposed 10 percent tariffs on goods imported from China for $ 200 billion. In response, China imposed duties on US imports of $ 60 billion, and in June, President Donald Trump approved duties on Chinese goods in the amount of about $ 50 billion.

If China really stopped buying Iranian oil, then this would be Beijing’s first serious concession to the economic war with the United States.

Against the background of this conflict, the Israeli media claimed that there is a plan for which Iranian oil will enter the world market under the guise of Russian, bypassing US sanctions.

According to the Israeli publication Mako.co.il, the idea was approved at the September tripartite summit in Tehran with the participation of Russia, Iran and Turkey. In addition, it is believed that European countries are interested in such a scheme.

As for the EU, they strive to preserve not only the conditions of the Joint Comprehensive Action Plan on the Iranian Nuclear Program, but also trade and economic relations with the Islamic Republic. 

source: reuters.com, wsj.com